Independent I/S Broker to REPE (within same niche) - Addressing Skillset Gaps
Hello all - I am an independent investment sales broker in a niche market (think student housing, storage, medical, data centers, etc) and am seeking to move to the private equity / principal side of the business. While I have personally sourced, negotiated and closed X million dollars and Y square feet of deals involving rather notable buyers within my niche, I find there's a skills-gap in talking to employers on the principal side.
I identify the properties, contact their owners, get upfront due diligence (rent roll, leases, expenses, building info), put together the OM (including historical P&L and underwriting pro forma NOI), negotiate the pricing/terms of the sale, get LOI signed, buyer/seller attorneys negotiate the PSA and get the commission, and it's on to the next one. When I tell some version of this sequence of events to an interviewer on the principal side, there's often a silence and underwhelming vibe on their part.
Is it resentment for how little work they think is being done to earn six-figure commission checks? The fact of the matter is the hard part of brokerage (and the lion's share of time spent) is canvassing/sourcing, but it's just not very sexy to say I spend most of my day leaving voicemails and sending a hundred emails to owners that don't get responses. Don't principal side folks understand that an I/S broker just gets in the way and doesn't add much after the LOI is signed? What am I going to do, hack into the seller's computer and procure third party reports, management contracts and lease abstracts?
In my role I don't do capital markets, so there's no sources & uses (though I've done this in prior jobs), no waterfall, etc. Is that what principal side is expecting to hear from an I/S broker? Do they want to hear about lots of broker of opinions of value (which tend to be pretty back-of-envelope)? Do I need to do some ahem embellishing on the due diligence process? The only issue with embellishing is that buy-side shops tend to be very lean, which means that I'm actually going to be responsible for this due diligence / closing process. How do I fake-it-til-I-make-it on my involvement post-LOI?
Any thoughts are greatly appreciated. This is a fantastic community!
Not sure why, maybe just the pure honesty of it, but that above quote really jumped out at me.
Overall, your post sounds like maybe something in your mind, personal insecurity, or whatever is being assumed to be the issue (okay, I'll stop being an amateur psychologist..), but I wouldn't just assume they are "underwhelmed" with what you do as a broker. Buyside people understand it, and if it were really such "little work", we all just sell properties ourselves. I don't think buyside people think IS work is easy, but in all reality, I'd probably be bored listening to your "sequence of events" as I pretty much know that is what IS brokers do, I mean kinda obvious right?
So what should you do? Focus on how you can find properties, underwrite, value, develop investment theses, you know... buyside tasks! I think people expect brokers to "embellish" (hey, I'm not first to say it...), so yeah, should not be sooo afraid of that. Think of it this way... if your client ask you to come in and tell them how to make more money, do more deals, enter new markets/prop types, consider other financing choices, etc.... what would you say? That is where I would go with this, show them how your experience can make their business/fund more successful. The life and times of a broker will not be that interesting, how you can use that experience to make money, that will get them excited!
Thanks for the input - it's very helpful. I proposed the 'resentment' thesis to stoke debate and get deliberate pushback - otherwise I'd be at zero responses!
In this particular niche, everyone is looking for the exact same things, all share the same thesis and use the same pricing metrics - it's very much a commodity apart from some slight nuances that garner premiums. This homogeneity can make these conversation topics somewhat dull.
Going forward, I will lean on details of canvassing, details of the upfront diligence back-and-forth. Part of the issue, is that my 'story' is that I want to leverage my canvassing/rolodex/market knowledge to move to the principal side to learn the nitty-gritty of acquisitions / capital markets / asset management, but these shops tend to be so lean that they often want people who can already do these things. Perhaps I abandon the 'learning' as a reason for the switch? Why else do people want to be on the buy-side, other than for reasons of ego (armchair psychologists, unpack away!)? If I say it's more stable / less of a grind than brokerage, it sounds like I'm unmotivated.
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